Anxiety Attack

Remember the Misery Index? Created by economist Robert Barro in the 1970s to measure how the economy was affecting the average American, it is simply the combination of the unemployment and inflation rates. At its peak of 21.98 in June 1980, the index foretold Jimmy Carter's exit from the White House.

Today, the index is 8.77. So President Bush must be riding high with voters, right?

Wrong. Even though the economy grew at a rapid 5.3 percent rate in the first quarter, and the unemployment rate is the lowest it has been in nearly five years, the president's approval rating stands at 38 percent. And a whopping 67 percent of 1,002 adults surveyed last month by the Gallup Organization said they were "dissatisfied" with the state of the union. Another recent Gallup Poll found 64 percent of respondents thought the economy was either "only fair" or "poor."

While the high price of gas--not to mention the war in Iraq--is dragging down Bush's approval ratings, former House Speaker Newt Gingrich thinks the middle-class malaise runs far deeper and may well have its explanation in the nature of today's economy. In a global economic reality of outsourcing, offshoring, and increasing automation, Gingrich says, "If you're really smart, you're apprehensive."

Steven Ng sure is. A 28-year-old computer programmer from Orange County, Calif., Ng was laid off in April by hard-drive maker Western Digital when his group got outsourced to Asia. Ng had done all the right things, keeping his skills up to date and working in a growth industry. So, eight days later, he found a job with LifeScript, an online nutritional advisory company. But it is his sixth different job since 2001, and while Ng would seem perfectly adapted to dealing with a high-velocity economy, he craves steadiness. "I would love to have job stability, but I don't think it exists anymore like it did for our parents, working for 40 years at the same place," he says.

That's only one of the changes the economy has undergone. Even though the numbers paint a picture of a growing economy with mild inflation, the numbers also paint a different portrait. America is fast becoming a nation of haves and have-nots, with rising income inequality. Data from the Federal Reserve for 2001 to 2004 show that median family income rose just 1.6 percent during that period, compared with 9.5 percent during 1998 to 2001. Income distribution from 1995 to 2004, during both an economic boom and a recession, kept tilting toward the already wealthy. The top income quartile gained 77 percent, while the bottom gained just 8 percent. Such statistics reinforce the commonly held notion that Congress and Washington are only looking out for the rich, changing the tax code in recent years to favor those who derive their income from investments rather than wages.

The income disparity is rubbed in most people's faces daily on television and in magazines. Extremes in wealth and poverty aren't new--the poor of a century ago surely knew that the Rockefellers and Gettys lived way better than they did--but "today you can go on the Internet and get the floor plans to Bill Gates's house," says Gregg Easterbrook, author of The Progress Paradox. And it's not just celebrities whose decked-out homes get regularly featured on E! and MTV; it's middle-class families vying for "extreme makeovers" to their houses.